Term and Whole Life Insurance

• Premature death occurs when a family head dies with outstanding unfulfilled financial obligations.
• Term insurance provides temporary protection.
• Cash-value life insurance includes a savings component and builds cash values.

Term Life Insurance Conversion

• Convertibility allows exchanging a term policy for a cash value policy without providing evidence of insurability.
• The attained age method calculates the new policy's premium based on the insured's age at the time of conversion.
• Yearly renewable term insurance is issued for one-year periods.
• A term to age 65 policy offers protection until age 65, after which the policy expires.
• Reentry term insurance offers renewal premiums based on lower mortality rates if the insured provides acceptable evidence of insurability.
• Return of premiums term insurance refunds premiums at the end of the term if the insurance is still active.

Whole Life Insurance

• Whole life insurance is a cash value policy that provides lifetime protection.
• Ordinary life insurance features level premiums and lifetime protection.
• The legal reserve is a liability that must be covered by sufficient financial assets.
• The amount at risk is the difference between the legal reserve and the coverage's face amount.
• Cash surrender value is the accumulation in ordinary life insurance policies.
• Limited payment life insurance offers lifetime protection with level premiums paid only for a specific period.
• Single premium whole life insurance provides lifetime protection with a single premium payment.
• Endowment insurance pays the face amount if the insured dies within a specific period; if the insured is alive, the face amount is paid to the policyholder.
• Variable life insurance is a fixed-premium policy where the death benefit and cash values vary with the investment performance of a separate account managed by the insurer.
• Universal life insurance is a flexible premium policy that provides lifetime protection.
• Indexed universal life insurance is a type of universal life insurance with a minimum interest rate guarantee; additional interest may be credited based on the gains of a specific stock market index.

Life Insurance Policy Clauses

• The ownership clause grants the policy owner all contractual rights in the policy while the insured is living.
• The entire contract clause specifies that the life insurance policy and the attached application form the complete contract between the parties.
• The incontestable clause prevents the insurer from contesting the policy after it has been in force for two years during the insured's lifetime.
• The suicide clause states that if the insured commits suicide within two years after the policy is issued, the face amount will not be paid, but the premiums will be refunded.
• The grace period allows the policyholder 31 days to pay an overdue premium.
• The reinstatement provision allows the owner to reinstate a lapsed policy under certain conditions.
• The misstatement of age or sex clause adjusts the amount payable if the insured's age or sex was misstated, based on what the premiums would have purchased at the correct age and sex.

Beneficiaries

• The beneficiary is the party named in the policy to receive the proceeds.
• The primary beneficiary is the first entitled to receive the policy proceeds upon the insured's death.
• A revocable beneficiary designation allows the policy owner to change the beneficiary without the beneficiary's consent.
• An irrevocable beneficiary designation cannot be changed without the beneficiary's consent.
• The change of plan provision enables policy owners to exchange their existing policies for different contracts.
• A war clause excludes payment if the insured dies as a direct result of war.

Policy Assignments

• Absolute assignment transfers all ownership rights in the policy to a new owner.
• Collateral assignment temporarily assigns a life insurance policy to a creditor as collateral for a loan.
• The policy loan provision allows the policy owner to borrow the cash value of the policy.
• The automatic premium loan provision allows an overdue premium to be automatically borrowed from the cash value after the grace period.
• A participating policy pays dividends to the policyholder.
• A non-participating policy does not pay dividends.
• The paid-up additions option uses dividends to purchase additional paid-up whole life insurance.
• Nonforfeiture value, or cash surrender value, is a payment to a policy owner who is withdrawing the cash value.
• Non-forfeiture laws grant the policy owner the right to the policy's accumulated cash value in case of policy termination.

Policy Options

• The life income option provides installment payments only while the beneficiary is alive, ceasing upon their death.
• The waiver of premium provision waives all premiums due during a period of total disability of the insured.
• The guaranteed purchase option allows the policy owner to buy additional insurance amounts at specified times without providing evidence of insurability.
• The accidental death benefit rider doubles the face amount if death occurs due to an accident.
• The cost of living rider allows the policy owner to purchase one-year term insurance equal to the percentage change in the consumer price index, without providing evidence of insurability.
• Accelerated death benefits riders allow insureds who are terminally ill to collect part of the insurance benefit before death.
• A viatical settlement involves the sale of a life insurance policy by a terminally ill insured to another party, often investor groups.
• A life settlement is a financial transaction where a policy owner sells a life insurance policy they no longer want to a third party for more than its cash value.